The construction industry is one of the cornerstones of the US and world economy. For example, in 1997 the construction industry in the US for more than 500 billion dollars of GNP. More than 200 billion dollars are spent on the construction of new dwellings each year.
A substantial portion of the cost of construction is due to the expenses of cost estimation, the administration of the bidding process, contract and sub-contract management, generating documentation needed for financing, and allowances for contingencies. In addition, major cost increments are frequently experienced due to errors in cost estimation, mistakes in bidding, and in dispute resolution with respect to contract obligations, performance responsibility and change orders. Indeed, it can be said that major cost overruns are more typical than not. It has been estimated that such contingencies and problems add 30% or more to the overall cost of the work, and resultant schedule delays cause further consequential losses. Given the enormous size of this sector of the economy, the cumulative inefficiencies, errors and uncertainties in the construction bidding process and in the administration of construction contracts represent a very important source of lost economic value to society.
A particular problem in the traditional approach to construction contract bidding, cost estimation, and management of contingencies stems from the inability to sufficiently detail the work description. In the existing approach to bidding, the plans and specifications are circulated with a description of the work to be bid to the respective subcontractors to price a portion of the work. Each subcontractor then estimates labor, material and administrative costs and profit based on the scope of work required. Each subcontractor's estimation of the scope of work is influenced by the subcontractor's own interpretation of the plans and specifications, and is based also on each subcontractor's assumptions as to the respective performance responsibilities of the general contractor and the many other subcontractors. Mistakes and inconsistencies of interpretation of the plans and the scope of each bid are difficult, if not impossible, to avoid in traditional bidding.
Experience has taught contractors and subcontractors to add very substantial allowances to the bid price for the resulting contingencies, uncertainty, delays and dispute resolution costs. Likewise, owners and lenders of necessity also must allow for these contingencies and uncertainties, increasing the cost of capital and loan administration. In addition, the traditional bidding process does not provide an effective opportunity to correct errors, omissions and ambiguities in the plans and specifications prior to submission of the bids and awarding of contracts. Further, and of increasing significance, is the slow, by-hand and by-phone process of exchange of bid and contract management documentation and information.
These problems are manifest in spite of architect-prepared plans and sound engineering practice. Even where computer assisted design (“CAD”) drawing and specification systems are employed, experience shows that there remains real uncertainty as to exactly what aspects of the project work are the responsibility of which subcontractor, and exactly how much labor and exactly what materials will be required for which subcontractor's performance. Likewise, portions of the scope of work which are inadvertently excluded form the subcontracting bids create additional contingencies and uncertainties for the general contractor, and controversies, often expensive and protracted, sorting out responsibility and liability for work and payment of costs.
If each bidding contractor and subcontractor could know that the work bid could be completed at a given bid price, there would be little need for contingency bidding. Likewise, an accurate and completely detailed description of the work being bid or constructed would assist in preventing or quickly resolving disputes concerning contract obligations and performance.
If information generated during the bidding process could be interactively channeled back and forth between the general contractors, architects and owners before the finalization of the contracts, many mistakes and ambiguities in the plans and specifications could be corrected in time, e.g., prior to contract let, to avoid change orders and disputes. When post-contract changes to the plans or specification are required due to circumstances which are unforeseeable at the time of bidding, a completely detailed description of the change of scope of work, and of the extent of needed modification of the general contract and each subcontract would allow such change orders to be managed quickly and fairly.
What is needed, and is not present in the prior art, is an interactive, computerized system and method, preferably communication enabled via the Internet, LANs or WANs, for controlling the construction bidding and contracting process to provide a certain and complete description of the scope of work required under each contract and subcontract so as to avoid inconsistencies, omissions, ambiguities and mistakes in the interpretation of plans and specifications, and for the ongoing management of the financing, and construction management phases of the project. What is also needed, and not present in the prior art is a means and method for systematically linking the construction plans and specifications to the bid and contract generation process so as to provide an interactive, bi-directional flow of information to increase the accuracy, completeness and clarity of both the contracts and the plans.